by The fact that consumers care about ethics and authenticity is undeniable: provenance is already a big deal—and it’s only getting bigger. This sentence demonstrates that supply chain transparency is neither a fad nor a new phenomenon.
While companies that understood the benefits of supply chain transparency may have had a competitive advantage ten years ago, in today’s ethically conscious consumer culture, transparency is quickly becoming the norm.
So, how can supply chain transparency benefit your company?
Before we answer that question, let’s define supply chain transparency and how it differs from supply chain visibility.
Following that, we will look at the four main advantages of supply chain transparency and how to achieve it.
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Table of Contents
What is the definition of supply chain transparency?
In essence, supply chain transparency means that a company knows exactly what is going on at every stage of its supply chain and communicates clearly stated, factually supported information about its supply chain operations both internally and externally.
Among the areas of concern addressed by such disclosures are:
- product quality and safety standards
- raw material sourcing
- labor practices
- environmental protection and sustainability, among other things
Because a transparent supply chain projects an image of a business that is honest and upfront about its practices, and thus trustworthy, it is the best way to build trust between suppliers, companies, and customers.
However, as previously stated, genuine supply chain transparency necessitates factually supported information rather than statements expected to be taken at face value.
Indeed, today’s consumers are unwilling to give a brand the benefit of the doubt if that brand cannot provide detailed information about the history of their product.
As a result, visibility and trustworthy data are critical for enabling supply chain transparency.
Supply chain visibility vs. supply chain transparency
Despite their similarity, there is a significant difference between supply chain transparency and supply chain visibility.
In the most basic sense, visibility is internal, whereas transparency is external.
Supply chain visibility refers to a company’s ability to see into operations at every tier of its supply chain and to enable its supply chain stakeholders to share all relevant information with one another, including:
- Daily production activities
- QC inspection reports
- Corrective and preventative actions
- Factory audits
- Labor conditions
- Raw material sourcing information
Having visibility into the supply chain puts all responsible parties on the same page, resulting in greater overall efficiency.
Meanwhile, while supply chain visibility enables supply chain transparency, it represents the next step in information sharing, namely providing manufacturing details of public interest.
The external aspect is critical: a company may have complete visibility into its supply chain operations, but it cannot claim supply chain transparency if it does not share that knowledge with others.
Why should you invest in supply chain transparency?
You’ve probably heard a lot about supply chain sustainability in recent years.
Companies of all sizes are working to reduce their environmental impact and preserve natural resources for future generations.
This frequently includes reducing energy and water consumption, investing in reusable storage materials, using recycled materials, and providing employees with a safe, sustainable work environment.
However, these sustainability efforts will be ineffective unless consumers have access to this information.
Transparency in the supply chain entails sharing information about how your products are manufactured with the people to whom you sell your products.
Even if your sustainability efforts are still in the works, you can demonstrate to your customers that you’re on the right track.
This includes a variety of contentious issues such as fair trade practices, paying your employees a living wage, and even providing some sort of continuing education program.
Investing in these types of programs can help you win over customers who hold similar beliefs.
4 advantages of supply chain transparency
The prospect of publicly disclosing information about the inner workings of your supply chain may appear daunting.
Historically, businesses have been wary of disclosing too much about their sourcing practices, fearing that doing so would make them less competitive or expose their practices to criticism.
Furthermore, even for a company that is willing to be transparent, gathering all relevant data, ensuring its accuracy, and consolidating it into a shareable format can be time- and resource-intensive.
However, the numerous advantages of supply chain transparency outweigh the drawbacks and make the effort worthwhile. Here are a few examples.
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Customer confidence
Consumers today strongly believe that they have a right to know where their products come from and how they are made.
Before they open their wallets, they want to know that the product is safe and of high quality, and that the sourcing practices are consistent with their own values.
By making information about your manufacturing practices, safety standards, and supply chain ethics public, you help your customers feel informed and empowered about their purchases, making them more likely to choose your product over one that lacks provenance information.
Loyalty to a brand
Customer retention is the gold standard for business profitability.
It costs five times more to acquire a new customer than it does to retain an existing one, and a 5% customer retention rate can increase profits by 25%-95%.
When you share information about your supply chain, you build consumer trust, which earns your brand more consumer loyalty and increases the likelihood that your customers will buy your product again.
Brand loyalty also entails positive word-of-mouth advertising, such as your customers proudly displaying your logo or recommending your toy products from parent to parent.
Furthermore, an enthusiastic customer base can be invaluable in garnering positive attention for your brand on social media, which is critical given that 71% of consumers are more likely to purchase products based on a social media referral.
Partnerships that are stronger
The trust fostered by supply chain transparency extends beyond your customers.
A company that has a transparent supply chain fosters a culture of trust throughout its entire ecosystem, attracting like-minded suppliers and partners.
Furthermore, fostering a culture of trust and transparency will allow you to communicate openly with your suppliers, forge long-term partnerships, and drive continuous improvement throughout your supply chain.
When your suppliers understand that honesty and transparency are rewarded, they are much more likely to resolve production issues directly with you rather than trying to get away with subpar work or unethical behavior behind your back.
In turn, you can assist your suppliers in improving their production and quality management systems by improving supply chain communication, sharing QC data, and providing quality and compliance training.
Competitive advantage in conjunction with industry-wide improvement
The advantages of supply chain transparency can be far-reaching, extending not only to your company but also to your entire industry.
To begin with, when you and your supply chain demonstrate quality and integrity in action to the world, you effectively gain a competitive advantage through responsible action.
However, progress does not stop there.
Whether you want to bring sustainably-raised meat to market or fight against the use of child labor, your company’s open stance on the issues and commitment to improvement can be an effective change agent.
As evidenced by the improvement in Uzbekistan’s cotton harvesting practices following widespread pressure over the country’s use of child labor, concerted action by industry players and human rights groups can drive meaningful change.
A large-scale change like this can only be achieved through multi-stakeholder collaboration – and, more importantly, it must begin with transparency about sourcing practices.
8 effective transparency strategies
Supply chain transparency does not happen overnight.
It’s a lofty goal, and it’s a challenge that even large corporations may find daunting.
However, given the numerous benefits of supply chain transparency for businesses, consumers, industries, and society as a whole, it is a worthwhile cause to pursue.
The following are some of the most important strategies for increasing supply chain transparency.
Data sharing
Transparency in your supply chain cannot be achieved without internal visibility.
And visibility is dependent on data: reliable, accurate data that is collected in real-time (or as close to real-time as possible) and shared throughout your supply chain.
Professional quality control and compliance software is now specifically designed to collect data related to Testing, Inspection, and Certification (TIC), with features such as real-time alerts and inspection monitoring.
You can see into every step of your supply chain, share all relevant information with stakeholders, and track your products all the way from mill or farm to shelf and table by tying together scattered QC data and disparate management systems under one accessible platform.
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Processes that are standardized
Having standardized inspection and audit processes in place is a good way to ensure that the data on quality, safety, and ethical compliance gathered at all of your suppliers’ factories is accurate and reliable – regardless of where the factory is located or whether the inspections and audits are performed by your in-house team or third-party providers.
Furthermore, implementing standardized processes ensures that your quality control and compliance KPIs and metrics are consistent across your supply chain: for example, an ethical score of 3.5 out of 5 stars means the same for your suppliers in Bangladesh as it does for those in China.
True transparency entails providing clear and meaningful information rather than an enigmatic set of numbers with no context.
Standardized processes make it possible for you to do just that.
Mapping the supply chain
If ethical violations are discovered in parts of your supply chain that you are unfamiliar with, your ignorance will not be used as an excuse.
On the contrary, allowing unauthorized subcontracting to occur without your knowledge or failing to investigate the full supply chain of your raw materials will cause more reputational damage to your brand.
With TIC-specific software, you can easily map your supply chain beyond your tier-1 suppliers and ensure that all sourcing and subcontracting, both upstream and downstream, has been authorized and accounted for.
Professional quality control and compliance platforms provide you with a 360-degree view of your supply chain as well as easy access to all relevant reports, including the state of each supplier’s compliance, ongoing corrective action, and a follow-up schedule.
This makes it simple to compile all of the information you may want to share about your suppliers and ethical practices.
Supplier evaluation
You can keep visible scorecards on your suppliers and production runs if you have the ability to capture supply chain data in real-time, store it digitally, and analyze it (which you can do with quality control and compliance software).
This enables your supply chain team, as well as all supply chain stakeholders and future business partners, to better understand potential risk areas in your supply chain.
Collaborating with transparent, long-term suppliers
Your business is only as good as its vendors.
You can’t sell yourself as a sustainability leader unless your suppliers share your vision.
Transparency in the supply chain entails disclosing information about your suppliers to the public, so ensure that your suppliers share your commitment to these issues.
You can learn more about how your suppliers source and deliver their products by working with them.
If one of your suppliers does not receive a gold star for sustainability, you can either find a new supplier or work with them to resolve the issues. Your suppliers should be willing to share information about their practices with you so that you can pass it on to consumers.
Identifying and tracing the origins of ingredients and materials
You should be able to trace every material or ingredient used in the production of your company’s products, including where and how these materials are harvested, the working conditions of the people who harvest these materials, and the environmental impact of these materials, by working in collaboration with your suppliers.
If you work in the food industry, you should learn about the animals or fields that produce these ingredients, as well as whether your supplier is concerned about the environment.
The same can be said for your manufacturing materials.
Determine whether any of these materials are environmentally hazardous and whether they can be recycled or reused.
This includes the resources required to transport and protect these materials as they move through the supply chain.
If you discover that some of these materials or ingredients are hazardous to the environment, look for a more environmentally friendly substitute.
Establishing open channels of communication
Transparency is usually associated with shareability.
You and your business partners should be prepared to share information with one another and the general public.
If you have a question about the materials or ingredients used by your company, your suppliers should be able to answer it.
You must keep these lines of communication open, whether through text messages, email, or a digital supplier quality management system, rather than blindly signing on the dotted line when your supplier shows up with another order.
Investing in dependable communication extends to your relationship with your customers.
Your company most likely has at least one social media account or a contact page, and your customers expect you to respond if they have a question about your company.
In addition to sharing information about your supply chain on your website or through a press release, make time to directly answer any customer questions.
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Keeping and disseminating data about your supply chain
You can’t have a transparent supply chain unless you actively monitor your operations and collect data on how your products are manufactured.
It should not be difficult to share information about your company with the general public.
With the right business software, you can automatically collect data on your company and its products, allowing you to quickly share this information with anyone who is interested, including the press, shareholders, and customers.
This includes information about your workforce, how they are treated and paid, how much energy and water you use to make your products, how your products are made, and how they move through the supply chain.
To save time, automate the data collection process and send it off with a few clicks.
Transparency in your supply chain demonstrates to customers that you have nothing to hide.
Consumers have a right to know more about how these products are made so that they can make educated choices when comparing different brands.
Even if your company is still working toward large goals, you can begin sharing information about how your products are made to gain consumer support.
Find suppliers who support your cause, trace your ingredients and materials, maintain open lines of communication, and collect as much data as possible about your operations.
Conclusion
Supply chain transparency is neither a fad nor a new phenomenon.
There are four main advantages of supply chain transparency and how to achieve it.
A transparent supply chain projects an image of a business that is honest and upfront about its practices.
Supply chain visibility refers to a company’s ability to see into operations at every tier of its supply chain.
Having visibility into the supply chain puts all responsible parties on the same page, resulting in greater overall efficiency.
While supply chain visibility enables supply chain transparency, it represents the next step in information sharing, namely providing manufacturing details of public interest.
When you share information about your supply chain, you build consumer trust.
A company that has a transparent supply chain fosters a culture of trust throughout its entire ecosystem.
The advantages of supply chain transparency can be far-reaching, extending not only to your company but also to your entire industry.
For example, a 3.5 out of 5 stars means the same for suppliers in Bangladesh as those in China.
With TIC-specific software, you can easily map your supply chain beyond your tier-1 suppliers.
Transparency in the supply chain entails disclosing information about your suppliers to the public.
You can learn more about how your suppliers source and deliver their products by working with them.
Determine whether any of these materials are environmentally hazardous and whether they can be recycled or reused.
Investing in dependable communication extends to your relationship with your customers as well.
This includes the resources required to transport and protect these materials as they move through the supply chain.
Transparency is usually associated with shareability.
Transparency in your supply chain demonstrates to customers that you have nothing to hide.
Find suppliers who support your cause, trace your ingredients and materials, maintain open lines of communication, and collect as much data as possible about your operations.
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